Western Digital Corporation (WDC) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to Citigroup's day 2 technology conference, where we have approximately 200 technology companies participating this year. Your screen is working properly. I'm Mike Cadiz and I have Jim Suva on behalf of Citigroup, and I am pleased to host Western Digital today. And -- but first, we have a few housekeeping items, 3 to be exact. Number one, no media and no press are allowed, please. If you are a media or press, please disconnect immediately. If you're an investor subject to MiFID II, please ensure that you have applicable agreements in place. And three, there are disclosures that are associated with this presentation from Citigroup and available on our website, and contact us if you need those disclosures. And then the fourth one, I may add is, to ask a question, please click, Ask a Question on your viewing screen. We'll try to get to your questions as time permits. And importantly, we will ask your question anonymously without identifying yourself. So for this session, we're pleased to host Western Dig. And joining me today are David Goeckeler, CEO; and Bob Eulau, CFO. And before I kick it off, I believe Bob will want to take some safe harbor statements for us today.

Yes. Thanks, Mike, and good morning, everyone. We will be making some forward-looking statements, and we ask that you refer to our SEC filings for the risks associated with these statements. We'll also be making references to non-GAAP financials. And a reconciliation of our GAAP and non-GAAP results can be found on our website. So I think we're ready to go, Mike.

Wonderful. So let's kick it off with this question. So into the pandemic, a year ago, when we last did this forum, we were still early on into working from home, but Western Dig had been extremely busy. From a product perspective, would you mind talking about your 18-terabyte hard drives and your enterprise SSD products, where they are now? And how they're doing in the market? Why they are doing so well? And meanwhile, from a financial perspective, EPS from a year ago has gone from $1.23 in the June quarter last year to $2.16 most recently in the June quarter. What in your minds are some of the key moves from last September to today that enabled the traction of these products and the subsequent financial performance?

Mike, so first of all, thanks for having us on and having us here. We're thrilled to be here, Bob and I. Say hello to Jim for us, where we're thrilled you're here having this conversation. So yes, a year has gone by quickly in the pandemic. I mean I've been here 18 months now, and you hit on some of the key issues with the portfolio. Again, technology growth and profitability is driven by innovation. It's just as simple as that. And we've been focused on innovation, bringing market-leading products to our customers. Over the last year, we've done that, especially in the data center, as you pointed out. And those products have been very well received. Great value proposition to our customers. They are rapidly consuming them and that leads to better results for us. So specifically on the 18-terabyte drive, that is something a year ago where we were kind of in the process of going through qualifications that have been in R&D for a long time. It's a big step forward. It's the commercialization of energy assist on a hard drive, first time it's ever been done. So that's technology that's been in the lab for literally decades and working its way through to actually getting into a commercialized product where it can meet the performance and reliability standards that the biggest customers in the world will bet their data centers on it, and we are going through that process. Towards the end of last year, beginning of this calendar year, we saw those qualifications start to wrap up. And we've seen the continued adoption of the product throughout the year. Last quarter, it became our primary capacity point, nearly half the exabyte shipped, a very big jump to AT&T being the primary capacity point of what we're deploying. We continue to expect it to be the workhorse through the rest of the year and into '22. And so we feel really good about where the product is, where the technology is and it's driving good results in the data center business. On enterprise SSD, it's a little bit of the same. We have been going through a process of our next-generation NVMe enterprise SSD. We had -- we were on our second iteration of it, trying to get through the qualification ramp, and again, the most discerning customers in the world. We broke through on that right at the end of last calendar year into the beginning of this calendar year. And again, we've continued to see adoption and deployment of that product, both at the first big Cloud Titan where it was qualified. And then we've been continuing to work on additional qualifications as we've talked about as we go throughout this year, and we still have more of those coming. So we feel good about that product. It was completing what we think is a huge pillar in the portfolio of being able to have a qualified enterprise SSD product at the biggest data center customers. And so execution there has led to better results. And then finally, I'll say that the changes we made internally, inside the company. We reorganized into a business unit structure, which brings a lot of focus on to the development process. We brought in 2 very seasoned and high-scale general managers to run those businesses, to run NAND and HDD. That brings a much greater focus on the profitability and the P&L of each of those businesses. Bob put the financial structure around them as business units. So we've been going through that transformation inside the company, and that's leading to better results. It's leading to more focus, more innovation, more agility, and we're getting the better results. So we're happy with where we are first again. It all starts with innovation and then organizing the company in a way to focus on that innovation and then get the best financial result possible given the markets we're in.

Wonderful. You mentioned focus in your response. For folks who are familiar with the Western Dig name, you did have some issues in the past. So compared to the past and now, how were your points of focus different then from what they are now given your current success?

Yes. Well, I mean, I wasn't here in the past. I mean, all I can say is, we have 2 great portfolios. I'm really happy with the portfolios we have and the markets we're in. I think we're the only diversified storage player that can go to our customers and talk about how do we solve their storage needs from the foundation of the cloud to the device and everywhere in between. And so that's a great position to be in. Our sales teams, our go-to-market teams can go out and have a very broad conversation with our customers, and we can solve all of their storage needs. However, to develop the technology and get the most out of it, you have to drive focus, and that's where we could get a little better with a different structure, get the teams rallied around their particular focus. And then, again, bring in some very senior leadership that understands how to drive a large technology franchise, how to invest in the road map, how to make decisions to optimize profitability across all-time horizons, not just the next quarter but the next year and out beyond that and how to drive that portfolio. Those folks also focus on pricing. They have their own conversations with customers, so just more people that can get into the meat of the portfolio and how we drive this forward. And that's where we have focus on the technology and then leverage the broad go-to-market we have to get the best result possible.

Great. So for Western Dig, you offer both hard disk drive and flash solutions. Why does it make sense to have hard disk drive and flash together in the company? And we've seen great emphasis on explaining the benefits of having both hard disk drive and flash under one roof. I remember back in July, Dr. Sivaram had mentioned some items like market manufacturing, technology and customers or benefits. Could you elaborate a little more on that?

Yes. So first of all, I would encourage people to go take a look at the webcast that Siva did, and he really went through the details of the synergies across these 2 portfolios. I talked a little bit about it before -- and we were talking about the increased focus and kind of how we're structured, but it starts with the market and the customer. I mean we are focused on our customers' storage needs from the clouds to the device. And all of our top 20 customers buy from both sides of the house. So I think that's a really important point. Like, all of our top 20 customers buy both these technologies and need both of these technologies to solve their storage needs. So that's where it starts. It also gives us -- the scale of these 2 large franchises gives us the ability to have a very, very at-scale channel business. I think that's really important. We have a very strong channel business. We can put both HDD and flash through that channel. And then we have a very strong retail business. We can sell at nearly 400,000 points of presence around the world, every single country in the world. We sell hundreds of millions of devices into the consumer market on a yearly basis. And again, the ability to have that conversation across a larger storage portfolio, both NAND and HDD, gives us scale in that market, and that's a great market for us. We can go on and talk about manufacturing synergies or some back-end things where we learn from each other. So the technology, ASIC teams that are working across the technologies, but I think the best technology example is what we just announced with OptiNAND. The ability to use NAND in a hard drive to think about not building a hybrid drive like it's been tried in the past but using NAND to figure out, "Hey, how can we deliver a better product, better aerial density, better performance, better reliability?" That's what our customers want out of their storage solutions. How do I get more storage onto that product? How do I get better performance? And of course, reliability is just a huge, huge issue. If you're going to buy hundreds of thousands or millions of these devices and put them in your data center, they have to meet the ultimate reliability. So the teams working together over several years HDD, "These are the problems I have. These are the issues we need to solve." The NAND team kind of iterate -- those 2 teams iterating together has brought us to the point where we think we have a major step forward in the design of an HDD. So we also have technology synergy there as well. So we feel very good about having both portfolios inside the company. And we feel very good now that we've got the right structure to drive the right kind of focus and the right agility in the organization across that portfolio.

I'm glad you brought up OptiNAND because that was my next question. So I remember a couple of weeks ago, you announced OptiNAND technology for the hard disk drives, which seems to be a very unique and interesting architecture. Can you talk about the significance of this announcement to your hard disk drive road map and the implications to the capacity enterprise business?

Yes. I mean, again, this goes back to this common theme of innovation. So if you go back to a year ago where your first question started, we were very focused on getting energy assist out and getting it ramped. And it wasn't a question, would energy assist work? We knew it would work. The question is, getting it to work at the performance and the reliability where the largest customers in the world are going to bet their data centers on this technology, and we got over that. We got the qualifications done. The product is commercialized. It's a lot different between just making something work and making it work at scale, in production, with the right reliability and performance, and that's where energy assist got to. And again, last quarter, that led to very strong growth in that market led by that product. And here we are just a couple of months later in announcing the next major innovation in hard drives around OptiNAND, which is how to now continue to drive innovation to deliver a better product, better TCO to our customers. Our customers have more data to store than they can economically store. So if we continue to drive the right TCO, there's lots of opportunity out there. And what OptiNAND is, is the way to rethink about how the hard drive, specifically the control plane, and how it's designed and using NAND in that instead of DRAM, which gives us some better capabilities, which is -- the first thing is aerial density. Again, we're constantly driving the aerial density road map. How can we get more onto the same space, and we can drive 2.2 terabits per platter with OptiNAND. That's a big deal because that means we can deliver a 20-terabyte drive with only 9 platters. That's a major step forward and be able to control the BOM costs, and again, deliver a very strong TCO proposition to our customers. But it's not just aerial density. It's also performance. It can deliver better performance and higher reliability. So all of those things we talked about that our customers demand in a storage solution. It has the best performance. It has the highest reliability. This is innovation that I'm going to put in my data center, again, the largest, most sophisticated data centers in the world, that's what OptiNAND is directly targeted to that. It's the next step of innovation. I think with energy assist plus OptiNAND, we have several iterations, several generations of technology that we can continue to deliver a great value proposition to our customers.

Great. Thank you for all the Western Dig details. It's much appreciated. If you don't mind, can we pull back a little and step back and take a look at the industry? And could you give a brief snapshot of the current state of the hard disk drive and flash storage industry as we sit today?

Yes. I think briefly on the hard drive business, I think we've always pointed to the second half, the strength in the second half what we saw that maybe even a little earlier last quarter with the tremendous sequential growth we saw in our Data Center business, again, driven by the AT&T product. We continue to see sustained demand in the Data Center business. We see strength in the smart video business. So HDD, we continue to see that sustained strength that's going on. I mean we are all using the cloud more and more every day. Like, this conference in the past, of course, we would have probably all been together somewhere, and now we're using a lot of resources in the cloud to deliver it. So HDD, a continued good demand. In the flash market, we continue to think that the market has been pretty rational on CapEx over the last several years. And again, as we come out of the pandemic, we've been chasing the bit growth up a little bit. We currently see about 35%. End demand continues to be strong. There's some lumpiness by supply chain turmoil. Can our customers get all of the parts they need to deliver. Again, the cloud remains strong. I think the OEM market, you're seeing some of that lumpiness based on the supply chain, but good end demand. And then in the retail market, that's always driven by -- with COVID coming back and reopening and lockdowns in different parts of the world, there's always a little bit of turmoil in that market, but we're working through that. We expect that to be kind of short-term turmoil as we work through the next phase of COVID here, but continue to see strong end demand.

I'm glad you mentioned bit growth because as analysts, we read a lot of reports looking at the entire industry, and I noticed that many sources estimate that exabyte shipments in both capacity enterprise and flash should grow about 30% plus. So that leads me to 2 questions. Is that bit growth realistic? And second, how are you going to be able to meet and supply that demand?

Yes. We certainly think the bit growth is realistic. I mean, again, when we talk to -- just take the data center market, when we talk to our big data center customers, they have more data to -- they want to store more data. It's a question of what's the economics of storing more data. So there's lots of data in the world to store. Most of the data that's generated in the world is not stored. So -- and that gets to your second part of your question, so how do we satisfy that demand? Well, we continue to drive innovation. I mean this is why it's really, really important to continue to drive innovation, TCO advantages of being able to make it more economic to store data. Then you see that on the flash side, we're transitioning to BiCS5 now, all the nodal transitions that the industry continues to drive through. As Siva -- the point Siva makes to me over and over, Moore's Law is still alive and well in NAND. We can still do generation after generation and get better productivity out of the wafer. So continuing to drive that R&D, we target, and we're very comfortable with 15% cost downs in our portfolio going forward. And as you drive that cost down, you open up more TAM. So that's why we see that bit growth is still realistic. It's a market that, as you continue to drive the cost down, new applications become more economic and they become more viable. And I think one of the great things about being in this market over the last 18 months is just to see just the massive amount of innovation in devices that the companies come up with for that consume NAND. I mean there's always new devices that are coming on the market. So continue to drive innovation, continue to drive nodal transition, continue to drive the cost down, and I think we're going to see that bit growth. And then on the HDD side, again, HDDs are the foundation of the cloud. It's just as simple as that. That's what the HDD is right now. The predominance of the portfolio is now into the cloud. HDD is not what it was, looking backwards and looking forward to something very, very different. It's the foundation of the cloud. 90% of storage that are in the cloud is on HDDs. As our team likes to say, the future of HDDs is HDDs. There's no substitution because we're continuing to do things like energy assist OptiNAND. We're continuing to drive the economics of HDD as well, continuing to drive innovation that drives the total cost of ownership down which allows our customers to more economically store more data. And again, they have a lot of data to store. There's much more data available to store than they can actually store. And if we stay focused on innovation and execution across both of these portfolios, that bit growth will be there.

Glad to hear that there's clearly demand for the bits. But that leads also to the question as a company, as Western Dig, what levers do you have to improve the profitability or the gross margins as you place those bits in the marketplace?

Yes. Do you want me to start.

Yes. Bob, I've got kind of let Bob jump in here.

Yes. I mean we have a lot of opportunity to continue to improve profitability. Like Dave said, it starts with innovation and having unique products and meeting customers' needs. And over time -- and we talked about, Dave mentioned BiCS5, we're in the process of ramping our BiCS5 node right now. We think that's going to keep us on the road map of having at least 15% year-over-year cost declines on the flash side. Likewise, we're getting better at aerial density, on technology like OptiNAND, which over time, will also keep us delivering costs down over time probably in the low double-digit range. So we've got multiple ways to continue to improve our cost structure, and we feel like that, like Dave said, that's just going to open up more and more markets. And we'll be able to take advantage of the scale that we have both with our JV partner on the flash side as well as on the hard drive side.

Great. So to go back on my earlier topic about industry analysis and reports. Other forecasts I've seen point to annual data growth rates of 40%, 50%, even as high as 60% by 2025, which is not that far away. What trends are you seeing that support this forecast? And will there be enough storage to supply this demand in your opinion?

Yes. I mean I think the trends, I mean, again, we're all living in a world that's powered by the cloud and intelligent devices. Again, look at us all on this call and how much cloud resources are we using and how many intelligent devices do all of us have active at one time. And I think the -- it has been well reported and talked about, the pandemic just accelerated this. So the cloud is making available the most sophisticated technology in the world to every company out there. And I think of it as like the democratization of software development. The most powerful technology that companies used to have to build themselves is now available through the cloud, and this is a fundamental shift that is underway. It's easy to think of cloud has been around a long time, but it's actually penetrating the whole market, it takes a very, very long time. And the pace of innovation that's being driven, we have the largest companies in the world that are behind driving innovation in the cloud and every other company in the world and all of us in our personal lives is consuming that innovation. So whether it's IoT, whether it's AI, ML, pick whatever technology you want, that's being enabled in a way. And the adoption of that technology is just faster than it's ever been before because of the way it's delivered to all of us. So I don't see any issue with the pace of innovation continuing to drive the production of data. We can get into a long conversation about edge as well and all it in IoT and all of the things that are becoming connected, just the amount of data you're going to have in a car, for example, is incredible. But there's always more data available than data stored. I think that's an important thing to really understand. It's not an issue of, "Is there going to be enough data in the world?" There's going to be plenty of data generated in the world. The question is, how do we store it and do that in an economic way? And like I said, our biggest customers talk to us about, again, we're a big diversified storage company. We're the only company that's focused solely on this question. They talk to us about, like, "Hey, how can we store more data? Like, we have more data, our customers want to store more data than we're able to do because of the economics of it." So we continue -- that's where the innovation comes in. If we continue to innovate, we continue to drive the cost down of storage and deliver a strong TCO proposition to our customers, the data will be available -- there's data available source. There are already -- and there's going to be more of it. So again, it comes back to innovation, and this comes back to why are we organized the way we are. Why are the first people I brought into the company, big-time technologists that understand how to drive a business forward, how to own a P&L, how to make portfolio investments, how to execute and get the most out of it, how to stay really close to their customers to make sure we're driving innovation where our customers need it. And I think that's the change we've made inside the company. We have great fundamental technology. Obviously, if you're a hard drive maker, as long as we've been at it and the scale we operate at, you're really good at the technology. NAND, we can talk about our JV partner, and between the 2 of us, we're the largest supplier in the world. So we collaborate on R&D, collaborate on the technology road map. We stay focused on those, stay close to our customers, continue to drive innovation. This is not a demand-side problem, demand is there.

So you mentioned your JV partner. I have a question on that. But first, I got an e-mail question that dovetails nicely into your response just now. So given the ability to supply the demand for storage, do you currently see any component tightness or shortages as we sit today that would complicate the situation?

Yes. I mean I think everybody sees component shortages right now that's complicating every situation in our life, quite frankly. And this is something we've been working through for many, many quarters. And it's something our customers are working through. It's a little bit what I said earlier when we talked about where the markets are at. End demand, we continue to see very strong. Everybody's ability to satisfy that depends on the set of components they have to fully deliver to that end demand. So that gets worked out on a step-by-step basis. We're personally always working with our suppliers to get as much as we can to satisfy the demand we have and then our customers are doing the same thing. So that put some lumpiness, and it puts some -- the situation is not quite crystal clear because we're trying to manage through all of that. But yes, I mean the world is still working through supply chain tightness and supply chain -- making sure everybody can get everything they need.

Super. So on to the JV and without getting into recent rumors, we'll stay far away from that. Would you mind talking about Flash Ventures specifically? And help remind everyone about the JV's longevity and what benefits it brings to both you and Kioxia?

Yes. This is one of the great -- again, I've been in the -- I'm not new anymore. I've been here 18 months. But one of the great things about that 18 months is really getting able to the ability to understand the depth of this JV, how it works and just how important it is, and quite frankly, how strong the relationship is between the 2 of us. It's a JV that's been in place for 20 years. I don't know any other JVs in the technology space. There may be some that have been around 20 years and is still thriving and healthy. And it's that way for a reason because the JV allows us to collaborate on the R&D and production of NAND, something that's very important to the world. It's used in every device, every interesting device that all of us use every day is powered by NAND technology. It's a business where scale matters and investing in the road map and making sure, we've covered a lot of ground in this discussion already, how do we continue to meet the demand for storage and NAND and drive the price of that -- or the cost of that down. Is that -- we invest in innovation. And the JV allows us to innovate together to drive a road map that has been very beneficial for both of us. We talk about the 15% cost downs. We're very comfortable driving that. This is a technology team that's been very focused on what is the most capital efficient way to get the next bit? So as I go through a nodal transition, what is the most capital efficient way to do that to get the supply we need? And I think if you look at the numbers over the 15 generations of nodal transitions we've gone to, you've seen that the team has performed very, very well. And we're getting ready to take advantage of that again with the BiCS5 transition being very capital efficient. So one easy way to think about the JV is you think about the wafer, all the way up until the point the wafer comes out of the fab, we collaborate. So the R&D, the production of it, once the wafer comes out of the fab, we each take our share and we go our separate ways. We each have our own separate back end. We then each decide what markets we're going to be in. We then go out and are actively engaged in those markets. So that's maybe the simplest way to think about the JV.

If I could take you on a JV slight tangent just for a little bit. Would you -- do you have a moment to talk about customer inventory levels? And any thoughts on how it plays with typical seasonality?

Yes. I can start with that. I mean we -- as we said, we were expecting and have continued to expect the second half of the year to be strong. Our customer inventory levels, I would say, in general, are in a reasonable place. Some of the OEMs vary in terms of what they're able to get in terms of other components, and that slowed down and disrupted the supply chain like you had mentioned earlier. But I'd say, overall, inventory levels with the OEMs are reasonable. Our inventory levels, we think, are in a good place. We're pretty competitive in terms of flash inventory levels. We think we still have room to improve in terms of inventory on the hard drive side. But again, given everything going on in the supply chain right now and the cost of air freight, et cetera, we're making decisions that sometimes cause us to carry a little bit more inventory. And then lastly, I would say, in the channel, I think it's well known that last quarter, we ended up with very lean channel inventories as a result of the incremental demand that came from Kioxia. And so we're in the process of rebuilding our channel inventory over the next -- over this quarter and next quarter. But I think, overall, we're in a reasonable equilibrium on inventory, whether it's our own inventory or our customers and our supply chain.

And then I'll bring us back to hard disk drives. And with 18 terabytes have been ramped quite nicely, where do you see Western Dig -- or where does Western Dig see its customer base in their own individual architectural evolutions? Are most customers now leaning and gravitating towards the latest and greatest capacities and technologies? Or are there still perhaps 14 and 16 terabyte holdovers? And what would be the reason for that?

Yes. So let's first talk about our capacity enterprise business, our nearline business and how it gets sold. So about 60% of it goes into the cloud, which is, I think, primarily what you're asking about. About 20% of it goes into enterprise and then about another 20% through the channel. If you look at the cloud, you're making a very important point here, which is the cloud now -- I mean, given the scale of the cloud operators and the number that are out there, they don't all move in unison. So this idea that they all consume and then they all digest is really -- it doesn't work like that. They kind of all move at different paces. And it's not really leading and lagging, it's more of -- they're all going through their own architectural evolutions of their data centers, and there are different points in the evolution of that. And we had some of them that were right out of the gate, and they went to 18 as soon as they got through qualification and they were standing there ready to go and place orders and consume it quickly. We have others that are going to do that in the second half of the year. They're on 14 and they're going to go straight to 18. And then there's others that are going through 16 to 18, and so they're at a different point in their journey. So when you add it all up, 18 was half of our exabyte shipments in the last quarter. So it's a big shift to 18, but we're still going to see some -- I think 14 will trail off as we go through the end of the year, and there's still going to be some 16 in there, but we expect the 18 to be the workhorse of the portfolio going forward. Enterprise, we see enterprise demand coming back. I think that's a strength. And then the channel Bob talked about, a channel was really an interesting place last quarter with Chia, that's starting to renormalize again. Although, as I said earlier, we're continuing to see strong demand in the video market.

Great. And I think I have a question on end markets. So again, Western Dig is unique that you offer both hard disk drive and flash. And then looking forward, do you have any plans -- or what are the thoughts on expanding beyond that to DRAM, for example, other storage systems or other semiconductor end markets perhaps?

Well, I think, right now, we're focused on the 2 markets we're in. We're really happy with those markets. We're really focused on -- we see them as both growth markets. We're focused on the business model in those. And like I said, bringing very strong innovation to our customers and really, really leading where they're headed in meeting their storage needs. We always have -- we are always working on things in R&D. We're a big technology company. We have things in R&D. There's next generations of storage technology that we're looking at. And by the way, those storage technologies are also going to need the capabilities of both sides of the portfolio, the semiconductor side in NAND and more of the magnetic recording of HDD. So that's something maybe we can have Dr. Sivaram talk about. But for now, from the main focus of the portfolio is on the HDD and flash business. We feel very good about both those businesses. As we've talked about here today, we see plenty of end demand. It's a question of getting the innovation right, staying close to our customers, getting the TCO equation right and making sure we have the right investments in the business.

Great. So my next question is for Bob, but I'm going to give -- Dave, I'm going to give you your question first to think about it, then we'll come back to you. All right. So as CEO having sat in your chair for 18-plus months, is -- later as we end, can you think of anything else or any closing thoughts that you'd like to convey? And more importantly, are there any misunderstandings that you're seeing in investors today that you'd like to set straight or something that investors are underappreciating within Western Dig? So I'll leave that there and then I'll go over to Bob, and I'll ask about capital allocation and your capital allocation policies and how they apply to shareholder returns, whether dividends or repurchases. But given the pullback in the share price, would you consider being more opportunistic and being buying back shares at this point?

Yes. Well, Mike, I mean, we've, I think, been pretty clear in terms of our priorities. I mean the first priority is to reinvest in the business. And we've been -- fortunately, we've been generating very good cash, and we've been reinvesting in the business. I mean, we -- last year, I invested close to $3 billion in CapEx. We'll do the same thing this year. Likewise, we've invested over $2 billion in R&D in both of those years. So we're going to continue to invest in the business, and that's the #1 priority. As Dave said, these are really interesting growth businesses, and there's lots of opportunity there. Now to the extent that we generate cash in excess of that, then we're -- our #1 priority is going to be to delever the company. And we made a difficult decision last April to suspend our dividend. And at that time, we really committed to use the cash to delever the company, and we're going to continue to do that. Our goal is to get down to $6 billion in gross debt or $3 billion in net debt. And if we continue to generate cash, we're confident we'll be able to get there in the next few quarters.

Great. And Dave, your closing thoughts?

There's time to think about it, Mike. I appreciate that. It doesn't take me long to think about this. So look, I have even more conviction than when I came here, and I tell you why I came to Western Digital is, I have a very strong belief the world is driven by a technology platform that we're building out every day. And that is a very, very powerful cloud that evolves at an incredible rate powering ever more intelligent devices and connected by high-speed networks. And so our -- as a company, we can play across that entire architecture. We are the foundation of storage for the cloud. Like that is a great place to be. I mean, we are a cloud company in many, many ways. 1/3 of our business comes from the cloud, and the ability to deliver that storage for the foreseeable future that is the foundation of what I think is a seminal technology trend of our era is an incredible place to be. We also play in the device, right, with NAND. I mean, we can play across this entire architecture from the cloud, to the edge, to the device. We're the only company that can provide a diversified storage solution across all of that. We can have a much broader conversation with our customers about how they're driving across it. And by the way, those big Cloud Titans play across all of that. They obviously have big cloud franchises. They tend to have big consumer franchises as well. So our ability to play all across that and deliver a storage solution across it. And then over the last year, we've really made changes inside the company to increase the pace of innovation, increase the focus on the business, bring a better solution to our customers and bring a better outcome to our shareholders as well. I think as we continue executing down that path, I feel very, very good about what we're going to be able to deliver as a company.

Wonderful. Thank you very much. And with it, keeping it on time, we're going to give Western Digital a round of applause. And I'd like to thank Western Dig for their time today, Dave, Bob and don't forget the wonderful team behind you that does a lot of the work as well. We appreciate that. So on behalf of Jim Suva and Citigroup, I'm Mike Cadiz, everyone, have a great day and a great remainder of the conference. Bye-bye.